Cow Slaughter Suggests Continued Liquidation

“There is growing evidence that the extended cold weather has increased beef cow liquidation,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in his weekly market comments. “Total beef cow slaughter has been up 11.1% the last four weeks after declining early in the year. Year-to-date beef cow slaughter is now down a scant 3.7% from last year…”

Although U.S. cow slaughter declined sharply from a seasonal high in early January, Len Steiner and Steve Meyer explained in their Thursday Daily Livestock Report that it increased significantly in March and through April.

“Cold and wet weather in a number of key production areas certainly have negatively impacted cow-calf producers,” Steiner and Meyer say. “Also, the sharp decline in forward feeder prices has changed the profitability estimates on future calf production. Beef cow slaughter in Region 6 (TX, OK, NM, LA, AR) averaged 20% below year-ago levels through early March. But in the last three reported weeks, it has jumped some 20% over 2012 levels.”

Steiner and Meyer point out that Canadian imports of cull cows to the U.S. – up dramatically so far this year due to closure of a cull-cow packing plant north of the border – must also be considered.

“Since the beginning of the year, U.S. cow slaughter (total) is up 0.2% from a year ago, but when adjusting for the imports of Canadian cows, U.S. cow slaughter is down 2.4%,” Steiner and Meyer say.

Moreover, Peel says the unexpectedly high volume of feedlot placements in March also suggests heifers that had been retained for replacement may have begun wending their way into the market channel as early-season forage hopes were delayed by the delayed spring.

“The number of heifers on feed has fallen sharply since the middle of 2012. The April 1 heifer on-feed inventory was down 7.6% year-over-year,” Peel says. “However, this value is less of a decrease than the Jan. 1 heifer on-feed total, which was down 9.5% from the previous year. This likely indicates that much of the increased feedlot placements were heifers, probably including some heifers designated as replacements in the January inventory report. The combination of increased beef cow slaughter and relatively more heifers on feed at this point likely means that any prospects to avoid additional beef herd liquidation in 2013 may already be seriously eroded.”